1. ABC Inc., began the year with 10,000 units in stock but finished with 5,000 units. It produced 45,000 units for the period. Its selling price is $12 per unit, variable manufacturing cost is $5 per unit, and variable selling is $3 per unit. Fixed manufacturing and selling costs are $100,000 and $77,000 respectively.

The firm notes that variable cost per unit (both mfg and SGA) was the same this and the prior year.

What is the income under variable costing?

2. Refer to the prior problem. The firm informs you that inventory values under absorption costing decreased by $33,000. Compute (Income as reported under variable costing - Income as reported under absorption costing), noting that it is change in FMOH between the opening and closing inventory accounts.

3. ABC corporation informs you that is CM per unit of its product is $6 per unit and that this value has stayed constant for several years. Fixed manufacturing and selling costs are $100,000 and $75,000 respectively. The firm informs you that the change in inventory values (a decrease) was $22,000 under absorption costing and was $10,000 under variable costing. What is the income reported under absorption costing, if the firm sold 50,000 units? Assume FIFO cost flow.

4. Juno Corp began the year with 1,000 units in inventory, produced 10,000 units and sold 10,400 units. The units in opening (ending) inventory had FMOH of $10 per unit ($12 per unit). Compute (income under variable costing - income under absorption costing) if the firm uses LIFO to value inventories.

1. When an auditor obtains the A/R aging and sends letters to the customers listed asking them to verify the amounts, what type of audit evidence is being obtained?

2. A(n) _____ is a detailed instruction that specifies audit evidence to be obtained.

3. An audit plan consists of a detailed list of audit procedures to be performed.

True False

4. The main purpose of gathering audit evidence is to _____.

5. If an auditor determines that internal controls are ineffective, they will most likely take which of the following actions?

Missing data can be derived, and journal entries constructed, from information in the accounts.

The following schedule shows the amounts (in thousands) related to expenditures that a city welfare department debited and credited to the indicated accounts during a year (not necessarily the year‐end balances), excluding closing entries. The department records its budget, encumbers all its expenditures, and initially vouchers all payments. Some information is missing. You are to determine the missing data and construct all entries (in summary form), excluding closing entries, that the department made during the year.

hanex limited is considering investing $50,000/- in a new machine with an expected life life of 5 years. the machine will have no scrap value at the end of five years.it is expected that 2000 units will be sold each year at a selling price of $3.00 per unit, variables production cots are expected to be $1.65 per unit, while incremental fixed cost, mainly the wages of maintenance engineer are expected to be $10.000/- per year. Hanex limited uses a discount rate of 12% for investment appraisal purposes and expects investment projects to recover their initial investment within two years.

required

a. calculate and comment on the payback period of the project

b. calculate and comment on the net present value of the project

c. identify the limitations of the net present value techniques when applied generally to investment appraisal

d. explain why risk an uncertainty should be considered in the investment appraisal

Costs of Different Customer Classes

Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of $51 per case (a case contains 24 cans of nuts). Kaune sold 152,000 cases last year to the following three classes of customer:

The supermarkets require special labeling on each can costing $0.03 per can. They order through electronic data interchange (EDI), which costs Kaune about $60,000 annually in operating expenses and depreciation. Kaune delivers the nuts to the stores and stocks them on the shelves. This distribution costs $40,000 per year.

The small grocers order in smaller lots that require special picking and packing in the factory; the special handling adds $20 to the cost of each case sold. Sales commissions to the independent jobbers who sell Kaune products to the grocers average 6 percent of sales. Bad debts expense amounts to 7 percent of sales.

Convenience stores also require special handling that costs $29 per case. In addition, Kaune is required to co-pay advertising costs with the convenience stores at a cost of $15,000 per year. Frequent stops are made to each convenience store by Kaune delivery trucks at a cost of $30,000 per year.

Required:

EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Direct Materials $ 450,000 Direct Labour 225,000 Variable Overhead 1,125,000 Fixed Overhead 2,100,000

Actual Results: Machine Hours 160,000 hours Direct Materials $475,000 Direct Labour 245,000 Variable Overhead 1,150,000 Fixed Overhead 2,110,000


(i). What was the budgeted variable costs per machine hour for variable overhead, rounded to the nearest whole cent? a) $7.03/machine hour b) $7.50/machine hour c) $19.53/machine hour d) $20.83/machine hour


(ii). What is the budgeted Direct Labour cost at the actual level of activity? a) $245,000 b) $240,000 c) $210,938 d) $20,000


(iii). What is the budgeted Fixed Overhead at the actual level of activity? a) $2,100,000 b) $2,110,000 c) $2,240,000 d) $3,260,000


(iv). What was the difference between the actual and budgeted Direct Material costs at the actual level of activity? a) $25,000 unfavourable b) $25,000 favourable c) $5,000 unfavourable d) $5,000 favourable


(v). What possible reason could explain the difference between the actual fixed overhead costs and the budgeted fixed overhead costs? a) EKPN Company’s actual machine hours were greater than the budgeted amount. b) EKPN Company’s actual machine hours were less than the budgeted amount. c) EKPN Company spent more on fixed costs than it expected. d) EKPN Company spent less on fixed costs than expected.


Q#2: 20 Marks

Nick’s Novelties, Inc. is considering the purchase of electronic pinball machines to place in game arcades. The machines would cost a total of $300,000, have an eight-year useful life, and have a total salvage value of $20,000. The company estimated that annual revenues and expenses associated with the machines would be as follows:

Revenues $200,000 Operating expenses: Commissions to game arcades $100,000 Insurance 7,000 Depreciation 35,000 Maintenance 18,000 160,000 Net operating income $ 40,000 Required: 1. Assume that Nick’s Novelties, Inc. will not purchase new equipment unless it provides a payback period of five years of less. Will the company purchase the pinball machines?

2. If Nick’s Novelties, Inc. has a discount rate of 18%, what is the NPV of this investment?






















EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Direct Materials $ 450,000 Direct Labour 225,000 Variable Overhead 1,125,000 Fixed Overhead 2,100,000

Actual Results: Machine Hours 160,000 hours Direct Materials $475,000 Direct Labour 245,000 Variable Overhead 1,150,000 Fixed Overhead 2,110,000


(i). What was the budgeted variable costs per machine hour for variable overhead, rounded to the nearest whole cent? a) $7.03/machine hour b) $7.50/machine hour c) $19.53/machine hour d) $20.83/machine hour


(ii). What is the budgeted Direct Labour cost at the actual level of activity? a) $245,000 b) $240,000 c) $210,938 d) $20,000


(iii). What is the budgeted Fixed Overhead at the actual level of activity? a) $2,100,000 b) $2,110,000 c) $2,240,000 d) $3,260,000


(iv). What was the difference between the actual and budgeted Direct Material costs at the actual level of activity? a) $25,000 unfavourable b) $25,000 favourable c) $5,000 unfavourable d) $5,000 favourable


(v). What possible reason could explain the difference between the actual fixed overhead costs and the budgeted fixed overhead costs? a) EKPN Company’s actual machine hours were greater than the budgeted amount. b) EKPN Company’s actual machine hours were less than the budgeted amount. c) EKPN Company spent more on fixed costs than it expected. d) EKPN Company spent less on fixed costs than expected.


Q#2: 20 Marks

Nick’s Novelties, Inc. is considering the purchase of electronic pinball machines to place in game arcades. The machines would cost a total of $300,000, have an eight-year useful life, and have a total salvage value of $20,000. The company estimated that annual revenues and expenses associated with the machines would be as follows:

Revenues $200,000 Operating expenses: Commissions to game arcades $100,000 Insurance 7,000 Depreciation 35,000 Maintenance 18,000 160,000 Net operating income $ 40,000 Required: 1. Assume that Nick’s Novelties, Inc. will not purchase new equipment unless it provides a payback period of five years of less. Will the company purchase the pinball machines?

2. If Nick’s Novelties, Inc. has a discount rate of 18%, what is the NPV of this investment?

Explain the uses and limitations of a cash flow statement

Question 0ne (1) [15 Marks]
a) Briefly discuss five traits an individual wishing to start a business entity would consider.

b) Discuss the concept of a company having legal personality. Refer to legal authorities in
motivation of your answer.

Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below:

1.

value:
1.00 points

Required information

Beech’s managers have made the following additional assumptions and estimates:

1. Estimated sales for July, August, September, and October will be $400,000, $420,000, $410,000, and $430,000, respectively.

2. All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.

3. Each month’s ending inventory must equal 25% of the cost of next month’s sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.

4. Monthly selling and administrative expenses are always $56,000. Each month $8,000 of this total amount is depreciation expense and the remaining $48,000 relates to expenses that are paid in the month they are incurred.

5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.

3. Prepare an income statement for the quarter ended September 30.

4. Prepare a balance sheet as of September 30.

Alice is single and self-employed in 2018. Her net business profit on her Schedule C for the year is $190,000.

What is her self-employment tax liability and additional Medicare tax liability for 2018? (Round your intermediate calculations to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

Self-employment tax liability

Additional medicare tax liability

Nature of Uncollectible Accounts MGM Resorts International owns and operates hotels and casinos including the MGM Grand and the Bellagio in Las Vegas, Nevada. As of a recent year, MGM reported accounts receivable of $562,947,000 and allowance for doubtful accounts of $89,602,000. Johnson & Johnson manufactures and sells a wide range of healthcare products including Band-Aids and Tylenol. As of a recent year, J&J reported accounts receivable of $11,260,000,000 and allowance for doubtful accounts of $275,000,000. a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for MGM. Round your answer to one decimal place. % b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Johnson & Johnson. Round your answer to one decimal place. % c. Possible reasons for the difference in the two ratios computed in (a) and (b) include: Casino operators historically lose money on operations. Casino operators have larger accounts receivable. Individuals who may have adequate creditworthiness could overextend themselves and lose more than they can afford if they get caught up in the excitement of gambling. Casino operations experience greater bad debt risk because it is difficult to control the creditworthiness of customers entering the casino.

Consider the following information about Earl Grey, Inc.

• Total assets $250 million
• Total debt $110 million
• Preferred stock $ 35 million
• Common stockholders' equity $105 million
• Net profits after taxes $25.5 million
• Number of preferred stock outstanding 1.5 million shares
• Number of common stock outstanding 9 million shares
• Preferred dividends paid $2.5 per share
• Common dividends paid $0.70 per share
• Market price of the preferred stock $32.55 per share
• Market price of the common stock $26.00 per share

Use the information above to find the following.

1. The company's book value
2. Its book value per share
3. The stock's earnings per share (EPS)
4. The dividend payout ratio
5. The dividend yield on the common stock
6. The dividend yield on the preferred stock

Directions:

1. You will report the ratios and your analysis in a Word document.
2. Your analysis should include a discussion of the strengths or weaknesses revealed in each ratio.
3. All six ratios should be discussed.

Riverbed Windows manufactures and sells custom storm windows for three-season porches. Riverbed also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Riverbed enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,360 and chooses Riverbed to do the installation. Riverbed charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Riverbed $2,100 (which equals the standalone selling price of the windows, which have a cost of $1,110) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Riverbed completes installation on October 15, 2017, and the customer pays the balance due. Riverbed estimates the standalone selling price of the installation based on an estimated cost of $430 plus a margin of 10% on cost. Prepare the journal entries for Riverbed in 2017.

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,320,000 in manufacturing overhead cost at an activity level of 576,000 machine-hours.

      The company spent the entire month of January working on a large order for 12,300 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

a. Raw materials purchased on account, $311,000.
b. Raw materials requisitioned for production, $263,000 (80% direct and 20% indirect).
c. Labor cost incurred in the factory, $159,000, (one-third direct labor and two-thirds indirect labor)
d. Depreciation recorded on factory equipment, $63,200.
e. Other manufacturing overhead costs incurred, $84,600 (credit Accounts Payable).
f. Manufacturing overhead cost was applied to production on the basis of 40,780 machine-hours actually worked during the month.

g. The completed job for 12,300 custom made machine parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consist of direct materials, direct labor, and applied overhead)

Required:

1. Prepare Journal entries to record items (a) through (f) above [ignore item (g) for the moment].

2.Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items for your journal entries to these T-accounts.

3. Prepare a journal entry for the item (g) above.

4. If 10,200 of the custom made machine parts are shipped to the customer by February, how much of the job's cost will be included in the cost of good sold for February?